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Councillors and their disappearing pensions

There’s no doubt about the domestic conversation topic of the past week: pension pots. Which for many councillors, following a budget with little good news for local government – unless you’re a pothole hoping for a makeover under the Chancellor’s ‘potholes challenge fund’ – must have felt like being kicked when already down. No tricky Lamborghini or Bugatti choice for them. Their ministerial April Fools’ Day gift is having their Local Government Pension Scheme policies terminated at the end of their current term of office, and barred to their successors.

To put it in context, only a minority will be affected, they’ve had fair warning, and it’s unlikely their constituents, should they hear of it, will be overly distressed. There is another perspective, though: the democratic one – which, by chance, is being debated in Strasbourg this week by the Congress of Regional and Local Authorities of the Council of Europe (CoE).

The Congress of the Council of Europe (not to be confused with the wholly different Council of the EU) is the representative voice of Europe’s 200,000 regions and municipalities in the 47 CoE member states. Its function is to promote local democracy, which it does in myriad ways, including writing expert monitoring and advisory reports – like that being presented in Strasbourg, on the state of local democracy in the UK.

Disappointing and worsening would fairly summarise the report’s verdict, which is particularly critical of our councils’ highly centralised grant funding, their very limited local tax base and financial discretion, and the severity of the budget cuts imposed on them through the Government’s debt reduction programme. The effect can be to leave elected councillors, “the backbone of the local government system”, unable to exercise properly their political choice of weighing the benefit of services provided against the cost to the local taxpayer or user.

Ministers, by contrast, would seemingly prefer a completely invertebrate system. As the CoE report politely put it, they prefer and promote a “part-time logic of engagement” for councillors, who should see themselves not as paid elected representatives, but as altruistic volunteers – like scout troop leaders, the comparison chosen by Conservative Chairman, Grant Shapps, in a BBC Today interview last year.

European observers’ basic difficulty with this ‘logic’ is a linguistic one. They’re used to the ‘local’ in local government meaning, well, local – as in local pub, or shops, or school, or bus stop; stuff in one’s locality or neighbourhood.

They accept the French are a bit extreme with their 36,000 communes, whose mayors and roughly half-million councillors they are currently electing, and all of which constitutionally have more powers and service responsibilities than our district councils.

But, even excluding France, their Europe is one in which the bigger countries’ most local tier of government comprises several thousand local councils, with an average population of 8,000. England has just 325 equivalent councils with an average population of 160,000, and consisting – in cases like Cornwall (population bigger than Luxembourg), and Northumberland (area the size of Trinidad and Tobago) – of what even we until recently called ‘county’, rather than ‘local’, government.

And that’s our councillor problem. Successive national governments have taken a Tescoesque approach to local authorities and their elected members. Instead of “Pile’ em high, flog ‘em cheap”, it’s been “Make ‘em huge, and pay ‘em peanuts”.

It’s a logic that bewilders advocates of local democracy like the CoE, who would prefer local government on a recognisably local scale, but also accept that there is a choice. If you want councillors to be genuinely part-time volunteers, then the size of councils, of councillor workloads and their ward electorates has to be kept manageable by sufficient numbers of such volunteers.

But if, in the interests of what you consider to be efficiency, you want enormous councils, huge budgets, large wards and the smallest number of councillors you can get away with, then you should acknowledge the time commitment that’s inevitably involved and allow them to be paid accordingly.

Trying to have it both ways – humungous local authorities run by overstretched, parsimoniously paid part-timers – is a recipe for poor quality government and a betrayal of local democracy. For many councillors, the apparent choice is: get out and leave it to those who don’t need the money, or grab what financial compensation you legitimately can through other means, like pensions.

Ministers should recognise the phenomenon, because it’s essentially the same as they and their parliamentary colleagues do: making up what they consider their inadequate salaries by ‘stretching’ their expenses. The difference, of course, is that MPs do get salaries, of £66,400, while the average councillor’s basic annual allowance – before PAYE and National Insurance deductions – is around £7,000 and already incorporates a Public Service Discount of between 25 and 50%, in explicit recognition of the principle of council work as voluntary service.

Despite Labour’s pledge to vote against abolition in Parliament, the Blair Government’s intention, when it first proposed extending council employees’ Local Government Pension Scheme (LGPS) to councillors, was to restrict eligibility to those receiving Special Responsibility Allowances.

Not surprisingly, the Local Government Association (LGA) wanted the LGPS open to all councillors, arguing that any differentiation on the basis of work patterns would be both discriminatory and unhelpful to the cause of attracting and retaining councillors. But it was the Occupational Pensions Regulatory Authority who ruled that, for pension law purposes, all councillors should indeed be treated as employees, and therefore entitled to join the LGPS – which is what happened.

Ministers invariably label them ‘gold-plated’ or ‘taxpayer-funded’ pensions – as if councillors themselves made no contribution. They do, of course, but the package is undeniably attractive. It’s a tax-approved, career-average scheme with retirement and death benefits based on years in the scheme and average pay over those years in basic allowances and SRAs. Councillors contribute a flat-rate 6% of their current allowances, with the council paying the employer’s contribution, at a fluctuating rate averaging, according to the Government, around 22%.

The TaxPayers’ Alliance (TPA) found that in 2010/11 over 4,500 or one in five UK councillors were enrolled on the LGPS – at an estimated annual cost, now quoted authoritatively by Ministers, of £7 million.

Numbers, though, aren’t really the issue. Nor, apparently, is making any coherent case for change – the best the Government has bothered with being that allowances look a bit like a salary (a mini-salary, presumably), which could blur the distinction with paid employees, compromise councillors’ independence to represent their communities, and so have a negative effect on local democracy.